The Perverse Effects of Partial Employment Protection Reform: Experience Rating and French Older Workers

37 Pages Posted: 28 Jul 2005

See all articles by Luc Behaghel

Luc Behaghel

Paris School of Economics; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Bruno Crepon

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); IZA Institute of Labor Economics

beatrice sedillot

French Ministry of Social Affairs, Labour and Solidarity - Direction de l'Animation de la Recherche, des Etudes et des Statistiques (DARES)

Date Written: July 2005

Abstract

French firms laying off workers aged 50 and above have to pay a tax to the unemployment insurance system, known as the Delalande tax. This is an original case of experience rating in the European context, restricted to older workers, whose employment prospects are particularly bad. We evaluate its impact on layoff (firing) as well as on hiring, taking advantage of several changes in the measure since its introduction in 1987. We find particularly strong evidence of an adverse effect of the tax on the firms' propensity to hire older workers, thanks to a legislative change in 1992, when workers hired after the age of 50 stopped being liable for the tax. Chances to find a job increased significantly for unemployed workers older than 50, compared to workers just below 50 who remained liable for the tax. We estimate that before 1992, the tax reduced the probability that an unemployed worker aged 50 find a job by as much as 25%. Evidence on the effect on layoffs is less clear cut. The impact is sizeable only for the most stringent tax schedule, after 1998, but it is also imprecisely estimated.

Keywords: experience rating, employment protection, older workers, firing, hiring

JEL Classification: J23, J63, J65

Suggested Citation

Behaghel, Luc and Crepon, Bruno and sedillot, beatrice, The Perverse Effects of Partial Employment Protection Reform: Experience Rating and French Older Workers (July 2005). IZA Discussion Paper No. 1679. Available at SSRN: https://ssrn.com/abstract=769924

Luc Behaghel (Contact Author)

Paris School of Economics ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Bruno Crepon

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Beatrice Sedillot

French Ministry of Social Affairs, Labour and Solidarity - Direction de l'Animation de la Recherche, des Etudes et des Statistiques (DARES) ( email )

7, Square Max Hymans
F-75741 Paris Cedex 15
France

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